by Tom Norton
In the early 1990’s, during the debate over the Clinton healthcare plan, I recall sitting in an interesting meeting at my pharma company headquarters. In response to the Clinton’s charges that the industry was “price gouging,” my firm was proposing that we provide free prescription products to any patients who could not afford them. At that time, the concept was viewed as quite radical; and I do recall many in the room expressing significant misgivings about the idea – especially the possibility of lost sales.
In the end, however, it was decided that the firm had to proceed with this action because we knew other Rx companies were considering similar actions. So, while everyone understood that it would be expensive, it was also believed that in the end it might be worth it. For example, the company’s action might enhance its public policy reputation with the Administration; and perhaps more importantly, it could create future marketing & sales relationships with both the medical community and needy patients.
Oh, and there was one other important conclusion: It was thought this “free drugs” commitment would only last a short while. Maybe a few years, at the most.
Today, more than 20 years later, my old Rx firm is gone, but the “drug giveaway” concept that was supposed to be temporary is still very much with us. It’s worth asking: Why are these programs still in business? Pretty much for the same reasons that caused their creation in the 1990’s – continuing public policy and reputational concerns; potential professional relationships; and future sales prospects.
In 2013, these Rx offerings are known as “patient assistance programs”, or PAPs. There are an estimated 475 different programs operating across the country at an estimated annual cost of at least $5 billion. Although public interest in the plans is somewhat diminished, primarily due to the onset of the popular Medicare Part D Rx program, there is still a significant population utilizing the hundreds of plans that now function in the U.S.
But, logically, is it not true that all of these programs should go away once Obamacare is successfully up and running? Of course, and from a bottom line aspect, what a bonus for the Rx industry! The actual cost of the drug stock, the expense of administration, and the professional outreach effort, all returned to the plus side of the balance sheet.
It’s a nice theory, but I am afraid that’s not what will happen, at least not right away. Let’s look at where things in the PAP world are trending today and why I hold the position I do on this point.
To begin, the picture for PAPs in 2013 is much different now than in was during that 1990’s debate at my old Rx firm. Back then, the programs that were offered were very straight forward. The approach was to provide products at “no-or-low cost” to those patients who “could not afford to buy them at their local pharmacy.” Frequently, as was the case with my company, the decision as to whether or not a patient qualified for our free drug assistance was left up to the prescribing doctor. If the patient’s physician said the family obtaining the Rxs was “needy,” well, that was that. The family or individual got the drug the doctor prescribed at no charge. End of story.
But today’s PAPs are much more complex undertakings. The various programs are tied up with not only the aforementioned Part D issues, but they also are finding that the tendency of many employers to increase out-of-pockets deductibles, and raise insurance premiums due to the economy is quickly expanding the parameters of eligibility for many PAP’s. Consider these two 2013 PAP scenarios:
An individual has Part D coverage. Because of this, the patient’s access to PAP support is non-existent, right? Wrong. Several PAPs are now helping participants make their way through the $5,400 annual deductible in the so-called Part D “donut hole.”
A patient has basic health insurance from an employer. Is it possible that the individual can still qualify for PAPs? Since 2008, the answer is possibly “yes” if the individual is determined by the PAP to be “functionally uninsured” due to the combination of the lousy economy, high deductibles, and an income of $40,000 or less.
Contemporary PAPs are also advising patients on reimbursement options and the different market-access approaches available to them, including PAP-generated coinsurance and copay cards that help needy patients get access to specific therapies.
Finally, as Pharmaceutical Commerce points out, some PAPs have become Rx “hubs” providing “educational materials, on-call skilled nurses, patient advocates, and support services to maintain adherence and compliance for the medication.” In short, these PAPs have become pretty deep healthcare offerings.
The numbers using PAPs?
And how many people are actually using these ramped up PAPs? That’s hard to determine exactly since so many different plans exist. However, one recent survey, conducted by the Direct Relief Network which works with community and public health centers across the nation estimated that over 2.7 million individuals were accessing PAPs in their programs. That’s a lot of people, for sure, but using the Obamacare estimates of 30 million uninsureds as our baseline of need, it’s easy to ‘guesstimate’ that many more millions are likely using the PAP plans.
Even without exact numbers, we do have solid evidence that the utilization of PAP services is expanding rapidly. In a multi-year IMS study, it was reported that PAP programs are increasing the use of copay and discount cards by more than 30%, annually.
That figure is impressive, if somewhat startling. Conceptually, if the nation has more public Rx coverage than ever before, and now, with the advent of Obamacare, shouldn’t we be entering an era of almost 100 percent Rx coverage for everyone? Shouldn’t the PAPs be going out of business?
As I have said, theoretically, yes. But, think for a minute about how things have gone since the roll out of Obamacare. Just last week, we learned that several million people lost their private healthcare insurance, and presumably Rx services, due to Obamacare’s minimum health services mandate. What’s going to happen when these patients can’t get the drugs they need? I would suggest it’s pretty obvious. They’ll head to the PAPs.
PAP Management v. Obamacare
And how are the PAPs managing this evolving Obamacare environment? Several of the Rx reps I spoke to said simply, “For now, we just plan to keep our PAP programs going.”
But curious things are happening in the world of PAPs. A few company officials reported that some PAP patients are telling them they will continue to use their PAPs – instead of signing up for Obamacare. As one company spokesperson put it: “If a patient is currently eligible for one of our products, and that patient states categorically that they are not going to sign up for Obamacare since they don’t believe Obamacare will cover the PAP drug that we are currently providing, then we will continue to provide our product to that patient.”
Obviously, the advent of Obamacare has not caused the sophisticated PAP programs of 2013 to just go away. If anything, these PAPs, which are today regarded as valued “permanent programs” within their companies, seem to be looking ahead. That’s because many PAPs are now deeply linked to sophisticated marketing and sales operations either within their firms, or through consultancies, and at this point, I doubt any firm wants to see their PAP resources dismantled.
Free Market v. PAPs
However, setting aside all of the Obamacare uncertainty, there are free market developments occurring that could change the future course of PAPs.
More than a few PBMs recently have moved forcefully to reduce the use of PAP coinsurance assistance and other types of copay cards for products listed on their preferred formularies. How has this been achieved? The PBMs have simply removed any brand name products supported by PAP copays from the formularies, and replaced them with generics. And why have they gone to all this trouble? When a physician utilizes a PAP program for a needy patient, the PBM has to pay for the much higher cost brand name drug versus a lower cost generic.
This trend is obviously trouble for the PAPs. Will this PBM formulary policy be duplicated for PAPs under Obamacare? Yes, very likely, as the same PBMs are scheduled to be operating in that space. But I am guessing it will take a while for all of that to come on line in Obamacare. Maybe years.
Will PAPs Continue?
So, the storyline for the PAPs, although a little bit uncertain, appears to have no immediate end in sight. First, you have the Rx programs that will be offered under Obamacare that are clearly designed to remove the societal & economic need for PAPs. But with the current slow start for Obamacare, it’s pretty much guaranteed that the PAP plans are not going to vanish in the near term.
And then you have to consider the whole history of these programs. These entities have amazingly morphed from very simple 1990’s “temporary public policy band aids” into massive, highly valued prescription drug information & service platforms. What’s to stop their continuation? Nothing — except maybe PBM generic formularies.
It will be interesting to look back 20 years from now and think about PAPs. Will they still be with us in some form? I’d probably put a little money on that number.
Tom Norton is principal at NHD Smart Communications. He can be reached at email@example.com.